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March 21, 2009

R12 E-Business Tax - Rule#1 Use Your Rules

Oracle E-Business Tax (eBtax) in Release 12 is a powerful tool for managing your transaction tax compliance needs. R12 is not R11i with several tax engines, almost one per module. R12 is one tax solution which integrates with any application module. The Latin Tax Engine still available, though. For those who want to manage their tax compliance needs globally, seriously consider the advantages of leveraging the eBtax Rule Based engine.

The advantages become obvious when one considers that the tax compliance decisions are taken centrally by the tax manager, and implemented for all modules. Each tax decision results in a set of rules that are implemented as a unit. The Tax Rules implement these decisions using data from each transaction and the events and the process including any relationships to prior or future transactions. This new Rule Based Tax Engine has access to these context data. The primary rules use this context to make decisions based on five (5) key drivers - Parties, Place, Products, Purpose and the relevant parameters of the business Process attributes within the transaction itself. These Determining Factors are properly named, since these connect the real world transaction to the compliance world of tax. These contextual data connect back to Tax Classifications which are associated with master data. Employees, Suppliers, Customers, Locations, Inventory, Organizations and Trading Community Architecture repositories are all important resources To use Tax Rules effectively, well designed and abstract Tax Classifications and Tax Jurisdictions along with associated Geography are important. Using Tax Rules can reduce and even eliminate Tax Classification Codes, so it is an important consideration after the upgrade. While it applies the same rules globally across all modules and can thus reduce maintenance, it still allows the tax manager to limit application of rules to certain types of Transactions or Tax Events. In fact, it is a best practice to build tax rules only under the Global Configuration Owner (GCO), rarely using Legal Entity (LE) or First Party Overrides for unique situations. It is important that the compliance tax decisions are housed within the tax rule engine and thus made centrally, while limiting overrides at the LE level where possible.

I would go so far as to say that using eBtax Tax Rules to manage Tax Compliance is a key success factor for your Release 12 project.